E-retail success is not just about conversions, it`s about profitable conversions
By Lauren Freedman
We live in tactical times where it is always desirable to deliver traffic—but conversion is essential for survival. In recent research on conversion rates, commissioned by MarketLive, the e-tailing group identified key ways to think about conversion rates and ways to create higher conversions. Our goal is to share insiders’ tips and secrets that we learned by talking to the merchants who toil daily to move the conversion needle. As one merchant succinctly noted, “It’s not just about conversion, it’s about profitable conversion.”
Continuous benchmarking
Merchants are continually benchmarking their performance, internally as well as against their competitors and the industry at large. Conversion has become one of the most important indicators among merchants and we don’t foresee any change in this analysis methodology or the enthusiasm surrounding the topic. Data continues to drive decision-making and merchants have moved from rudimentary tools that began with little or limited data to a greater emphasis on numbers, profitability and, ultimately, accountability. Merchants are looking at everything from the cost of driving qualified traffic, to winning marketing strategies, to onsite merchandising tactics that they can improve for delivery of higher conversion.
As listed below, the world of merchandising and conversion has more questions than answers. Analysis of these three key issues should help direct merchants in their quest for optimal conversion.
1. How well are you communicating your value proposition?
All brands have a unique challenge when it comes to communicating with customers online. The home page once received the lion’s share of attention as it was the first place most consumers became acquainted with the brand. Today, external search drives much of the site traffic where landing pages, often resembling product pages, are likely introductions to the site. Merchants now must think about communicating their value proposition throughout the entire site.
To determine how to communicate your value proposition, ask yourself:
-- Are you a household brand or does your value proposition need to be reinforced?
-- Is your product full-priced or promotional by nature?
-- How important is image to your shoppers?
-- What are the top five messages you hope to communicate to your customer?
-- Do you have a tagline or slogan that supports your brand?
-- What role does customer service play in the overall equation?
-- Are you a true multi-channel believer who is channel agnostic when it comes to sales?
Sephora’s holistic home page, for instance, clearly articulates the brand position as a high-end beauty merchant. Brands are an essential part of the mantra with shop-by-brand dropdowns. Sephora’s free sampling and free gift packaging continue to win customers in a category where this might be considered essential. Rounding out the experience with Tips and Trends, Best Sellers, and What’s Hot encourages customers to embrace and shop Sephora.
Service is front and center in the Crutchfield value proposition, starting with visuals of people throughout the site and a clear articulation of reasons to shop at Crutchfield. This category page, as well as positioning on the home page, product page and customer service pages, reinforces that notion.
Price and promotion play out at Overstock.com. Whether it’s a limited time promotion for $1 shipping or creating a sense of urgency among shoppers with a Christmas countdown, Overstock leverages a series of tactics to brand the shopper experience. That approach is further supplemented with Deal of the Day, featured products and messaging that inspires the impulse purchase.
2. How do you stack up vis-à-vis the competition?
Now that you know your own brand, the next step in being successful is benchmarking your site against the competitive landscape. The e-tailing group is currently completing our 8th Annual Mystery Shopping, looking at 100 sites from both merchandising and customer service points of view. Over the years, we have found that merchants want to, and must, understand how they stack up against their competitors. We would suggest the following rules of thumb to assess your positioning. It’s a time-consuming effort and if dedicated internal resources are not available, we recommend outsourcing that work.
Here are 10 ways to determine where you stand in relation to your competitors:
1. Define your competition clearly online and from a multi-channel perspective.
2. Rank your top 10 competitors, identifying those that should be monitored on a quarterly basis.
3. Identify a series of elements that you will review from a branding, merchandising, multi-channel, and marketing perspective.
4. Sign up to receive e-mails on all sites and evaluate throughout the year with an emphasis on seasonal peaks.
5. Evaluate key baseline templates including home page, category page, product pages, search, and customer service.
6. Note the presence of innovative onsite merchandising.
7. Shop your own site and those of your competitors to understand the real shopping process from adding an item to the cart to post-order merchant communication.
8. Be honest about your own performance and share findings with your entire team on a quarterly basis.
9. Keep a running set of priorities to maintain a best-in-class site.
10. Attempt to add a critical innovation to the site each year.
3. How much of your traffic is truly qualified and likely to convert?
Delivering the right experience starts with the customer—and not all customers who visit a store or site are of the same type. As mentioned in the merchant’s words of wisdom, taking the long view of the customer is smart. Accordingly, my cardinal rule of thumb is “Know your customer.”
We will address three main shopper types from which most others are derived as this clearly points out where customers are in their readiness to buy. Merchants who sell across the retail channel often have a different outlook from those who live under a direct model and thus their conversion rate goals are quite different. All however need to qualify their customers.
Directed shoppers visit web sites with products and brands in mind; often with a catalog in hand to take advantage of quick order capabilities. Examples of these kinds of shoppers include a man looking for Valentine’s Day flowers for his wife two days before the holiday, a mother looking to buy a specific book for her daughter, or a woman looking to buy the latest Keen sandals for a camping trip. Another direct approach might be a future mother-in-law shopping for a shower gift for a bride. She will be selecting from a pre-established registry and only needs to factor in her budget prior to making a final selection and checking out. The common thread among these shoppers is that they are qualified, ready to purchase, and need little information in support of their quest.
Information seekers typically require more information before making a final buying decision. They may shop your site multiple times before finalizing a purchase or they may be multi-channel customers who finish their purchases at retail. As charted from the EMC2 study we conducted last holiday season, this customer is typically found in more information-intensive category such as computers, appliances, furniture, and home electronics.
Their likelihood to buy is stronger than the browser’s where the biggest questions are through which channel they will purchase and the timing of their purchase.
Multi-channel shoppers have a keen interest in shopping most conveniently. Fortunately, convenience comes in a variety of forms, many of which have shown promise from the perspective of multi-channel conversion including in-store pick-up and returns, in-store lookup plus the catalog standards of quick-order and shop-the-catalog.
The importance of multi-channel shoppers became evident in the results of Dieringer Research Group’s American Interactive Survey in 2004, which showed consumers spent $180.7 billion offline on products that were influenced by online research, representing a 31% year-over-year growth. This same study also concluded that for every consumer dollar spent directly online, at least $1.70 was spent offline after doing online research. Given online’s 2005 projection of 7.7% penetration of retail sales, according to The State of Retailing Online 8.0 by Forrester/Shop.org, this will long be a key part of the web’s vital role in driving retail.
These web-previewing consumers are an abandonment statistic waiting to happen, yet from a brand perspective they are critical to achieving corporate goals. Another upside to this situation is a finding from Forrester/Shop.org that 40% of customers who picked up in-store made an additional in-store purchase.
Asked to select his top conversion tactic, Mark Duff, director web strategy at REI, responded that in-store pick up of online orders has been a huge conversion driver. “It’s a well-known phenomenon. Offer to save someone $10 on shipping, and conversion goes through the roof,” he says. REI offers free shipping to stores. “Cart abandonment rates for folks who choose our in-store delivery option are significantly lower than for folks who select standard shipping. And we use regular replenishment trucks to get these items to our stores today. The power—and popularity—of this service continues to amaze me.”
Merchants are also beginning to embrace multi-channel selling through inventory lookup, for instance at Talbots.com, where shoppers express their channel preferences and the web facilitates those desires.
Talbots’ StyleSearch Feature, available on key products, has received a great deal of attention since its 2005 launch and use has far exceeded expectations, according to Cathy Cormier, director of online and database marketing at Talbots. It’s been embraced by the web and store organizations alike, as a coordinated effort is required to achieve success. Managers have observed that more people are coming to the stores than have actually reserved product online—meaning that many are using the tool simply to see what’s available without always taking the added step of reserving it. For Talbots, where taking care of the customer has always been a high priority, this is just another way to service the multi-channel shopper; one that will likely find other apparel merchants following suit.
In addition to the three kinds of customers, there will always be browsers who, by nature, are looking around and thus require a great deal more temptation. They are also more likely to be price shoppers and may be site jumpers merely seeking out the best price. Merchants can use a variety of tools and tactics to inspire this shopper set, causing them to take a chance and convert on your site. They typically include established as well as promotional tactics, driven by the mindset of the brand.
On the generic side are traditional tactics long favored by merchants from featured items to seasonal promotions. Of course, many tend to be category or brand-specific. For example, for apparel sellers, size guides will assist shoppers in selecting the right product while shop-by-outfit can be instrumental in fostering a multiple unit purchase that derives an increased average order. The depth and breadth of merchandising and marketing tools being offered on sites has grown exponentially with increased cross-channel integration, resulting in more compelling customer experiences.
Back to the basics
The melding of channels is certainly evident with greater use of traditional, back-to-basics tactics online. In 2005 a What’s New category was implemented on 82% of the sites and valued by 78% vs. 69% the prior year. “It’s all about the edit,” says CDW Corp.’s vice president of strategic marketing Fred Neil. “We do the edit for the customer. People want to be told what to do.” And telling people about top sellers does just that. “Top sellers are stronger than ever and we’re working to get them above the fold more,” says Brad Wolansky, director of e-commerce at The Orvis Co. Inc.
Lego has found that similar tactics work well for toys where what’s hot and what’s new are updated hourly on the home page for 19 countries. Loyal fans are especially interested in this area as evidenced by the fact that it’s been a very powerful tool in promoting conversions.
Sale, like search, was a universal winner and I certainly heard commentary along the lines of “anything free works.” As one merchant brilliantly recognized, “You can learn to drive high conversion; the best one is free including free trial period; but it’s really about driving profitable conversion. Free shipping outdoes 25-30% off.” It’s the mindset of many online shoppers, according to one department store merchant. Concurring was another niche cataloger who reported, “A free shipping pop-up on the home page or onsite increases conversion by a few percentage points.” That particular merchant uses dynamic pop-ups based on source code.
Free or reasonable shipping has been a tactic that has been debated since the beginning of shopping online. Typically, it has been category-based where if one leading merchant offers it, others follow suit. Also rather than presenting it unconditionally, merchants tend to select a threshold that ties in with increasing their average order and use that as a requirement to receive free shipping. In our Mystery Shopping survey, 46 out of 100 sites employed this tactic during the Q4 ‘04 selling period. Many struggled to find the perfect discounts, acknowledging that they’re trying to assess the appropriate percent off required to achieve the same conversion rates experienced with free shipping.
So many things support conversion. Delivering a solid brand proposition, clear marketplace positioning in a highly competitive world and driving qualified traffic are three essential requirements to succeed in any channel. Coupling these with best-in-class merchandising, marketing and customer service are the secret to selling and conversion.
A complete copy of this report is available at marketlive.com/go2report.
